Point (Cisco), counterpoint (HP)

HP answers Cisco's push into the server market, announcing a new family of data center switches and a new alliance program. HP could be on to something.

Recently the tech industry has been all a buzz about Cisco entering the server market. What would this mean to Cisco's relationship with large server vendors?

It didn't take long to get an answer. Monday, Hewlett-Packard took another step toward enterprise networking when it announced a new family of data center switches and a new alliance program called the ProCurve Open Network Ecosystem (ONE) with partners like Avaya, F5 Networks, McAfee, and Riverbed. This activity follows HP's wireless acquisition (Colubris) and its reorganization to place ProCurve within its Technology Solutions Group of other enterprise products.

Yeah I know. Lots of companies have taken on Cisco before but gained nothing more than niche status. True, but HP could be on to something here for several reasons:

  1. HP picked the data center, a traditional area of strength, to go after Cisco. In this way, HP can go after net new sales while piggybacking on top of its broad management software, server, storage, and services offerings.

  2. Many large customers are ready for a viable alternative to Cisco, especially in this economic climate. HP and others have a price/performance advantage.

  3. HP didn't choose its ProCurve ONE partners by accident. Rather, it surrounded itself with other data center networking leaders that complement HP pipes with application acceleration, WAN (wide-area network) optimization, and security. In some cases, HP ONE partners have larger market shares in these areas than Cisco.

Cisco is Cisco so it will use its massive cash hoards to out-market the competition as it bundles multiple products to drive sales into its massive customer base. Nevertheless, large organizations have also bought a thing or two from HP over the years. As of now, HP can't compete on the high-end of the routing/switching market with Cisco but it certainly can acquire Extreme Networks, Force10, or Nortel assets if it so desires.

In a global recession, Brocade/Foundry, HP, and Juniper are bound to make life a little tougher for Cisco overall. At the very least, those ultra high margins Cisco has enjoyed for years are certainly threatened. HP certainly seems up to the challenge.

 

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